1. RBI Guidelines:
- Inoperative Accounts and Unclaimed Deposits (January 1, 2024):
- Banks must classify accounts and deposits as inoperative if no activity occurs for 1-10 years.
- Banks must periodically review these accounts, trace the customers (or their heirs), and reactivate or settle claims .
- Asset Reconstruction Companies (ARCs):
- ARCs are required to become members of all CICs (Credit Information Companies), regularly updating their data and adopting Standard Operating Procedures (SOPs) for CIC-related matters .
- India International Bullion Exchange (IIBX) (February 9, 2024):
- Indian banks can now participate in IIBX as trading members or clearing members.
- They are also authorized to import gold and silver as special category clients .
- Revised Guidelines for Bulk Deposits (April 2024):
- Bulk Deposit definition revised:
- Banks must report deposits of ₹3 crore and above for scheduled commercial banks
- ₹1 crore and above for local area banks .
2. RBI Monetary Policy:
- Monetary Policy Framework:
- In 2015, the Government of India and the RBI agreed to keep inflation (measured by CPI – Consumer Price Index) under control:
- For the financial year 2015-16, inflation should be below 6%.
- From 2016 onwards, the target for inflation is 4%, but it can go up or down by 2%.
- This means inflation should stay between 2% and 6%.
- This agreement set a clear goal for the RBI to maintain price stability in the economy.
- Repo Rate and Stance:
- The repo rate (the interest rate at which RBI lends money to banks) is still 6.5%.
- The RBI has changed its approach to a “Neutral” stance. This means it is no longer actively tightening (reducing money supply) or easing (increasing money supply) monetary policy.
- Previously, the stance was “Withdrawal of Accommodation,” which meant the RBI was focused on reducing excess money in the economy to control inflation.
- The RBI is keeping interest rates steady and will now decide its next steps based on economic conditions without any strict policy direction.
- Liquidity Adjustment Facility (LAF):
- LAF (Liquidity Adjustment Facility) is a tool used by the RBI to manage the money supply in the economy. It includes two main transactions:
- Repo (Repurchase Agreement): Banks borrow money from the RBI by selling securities with an agreement to buy them back later, usually at a higher price. This helps inject liquidity (money) into the banking system.
- Reverse Repo: Banks lend money to the RBI by selling securities with an agreement to buy them back later, usually at a lower price. This helps absorb excess liquidity from the banking system.
- LAF helps the RBI control the amount of money circulating in the economy, ensuring that banks have enough funds when needed while keeping inflation and financial stability in check.
- GDP and Inflation Forecasts:
- GDP growth for FY25 has been projected at 7.2% with CPI inflation forecasted at 4.5% .
3. Regulatory Initiatives:
- Foreign Exchange Regulations (April 2024):
- It means the RBI has allowed authorized dealers (usually banks) to open extra Current Accounts specifically for businesses involved in export and import transactions that are paid in Indian Rupees (INR).
- In simple terms, businesses dealing in exports and imports can now have more than one current account to handle payments made in INR, making transactions smoother and easier.
- Capital Adequacy Guidelines for Trading Book (February 2024):
- It means the RBI has updated the rules on how much capital (money) commercial banks must keep as a safety buffer. These new rules are in line with international standards called Basel III.
- Additionally, the RBI has defined what is included in the Trading Book, which refers to the financial assets that a bank holds for short-term trading (like stocks and bonds).
- In simple terms: The RBI has set clearer rules for banks to ensure they have enough funds to cover risks from trading and other activities, based on global standards.
- Participatory Guidelines for Indian Banks in Bullion Market (February 9, 2024):
- It means the RBI has updated its rules, allowing Indian banks to trade gold and silver through the Indian International Bullion Exchange (IIBX). This will help increase India’s involvement in the global market for gold and silver.
- In simple terms: Indian banks can now buy and sell gold and silver on an international platform, which boosts India’s role in the global gold market.
- Credit Cards and Card Network Guidelines:
- RBI mandates that card issuers must allow customers to choose from multiple card networks when issuing credit cards.
- Additionally, the issuance of plastic credit cards can be substituted with electronic form factors .
- Reserve Bank Climate Risk Information System (February 2024):
- RBI is working on creating a Climate Risk Information System to monitor and address climate-related financial risks, making banks more resilient to environmental changes .
4. RBI’s Initiatives for Payment Systems:
- UPI Enhancements:
- The limits for UPI123Pay (used by feature phones) are enhanced from ₹5000 to ₹10,000 to encourage wider adoption .
- RTGS and NEFT Systems:
- Beneficiary account name look-up facility for RTGS and NEFT is introduced to verify beneficiary details before initiating fund transfers, minimizing errors and fraud .
- Note Sorting Machines (January 2024):
- New guidelines on Note Sorting Machines require that only BIS-certified machines meeting updated standards be used by banks from May 1, 2025 .
5. Financial Sector Updates:
- Securities and Investments:
- Pension Fund Regulatory and Development Authority (PFRDA) has introduced new two-factor Aadhaar authentication for accessing CRA systems .
- Bulk Deposits and Treasury Bills:
- It means the RBI has updated the rules for what counts as “Bulk Deposits” in scheduled commercial and local area banks. Bulk deposits are large sums of money that individuals or institutions deposit in a bank.
